Compensation: Don't be Your Employees’ Grandma
Editor's Note: Nothing against Grandmas - we promise! But some of the things that make Grandma endearing shouldn't be emulated by HR and compensation pros. Dan Walter expounds in this Classic lesson.
Grandmas are awesome. They are sweet, loving and great listeners with too many other good things to list. But, they consistently have one flaw. I know it’s mean to talk about Grandma’s flaw, but it is the same flaw many HR and compensation people also have. While it may be totally endearing in a Grandma, it’s completely counterproductive and infuriating when found in compensation professional.
Remember when you told your grandma you loved silver dollars and couldn’t get over the pair of gloves she gave you on your fifth birthday? The next thing you know, you are receiving a pair of gloves for every holiday and always with a silver dollar taped inside the card. Even though it brings up floods of great memories, there comes a time when the silver dollar has only sentimental meaning and your relocation to Miami makes the gloves useless.
People grow up. They change. They learn new things and often blossom into totally new iterations of themselves. Compensation programs are designed to support the growth of the majority of your employees. Your best employees grow up much faster than you plan. Unfortunately, most compensation structures don’t easily handle this growth. For many good reasons, we tend to focus on consistency. That means we often miss the rising stars in our organizations until we see them in full bloom at their next job (or the one after that.) Neither we, nor they, take advantage of their full potential while they are with us.
It is essential that our compensation programs allow for the outliers. Those unique individuals who can leap from level to level while others methodically climb the ladder. Our performance management systems must allow for identifying those who are too good to be in the “best” category. Our merit increases must account for the rare, but desired occasions when employees grow up faster than our systems planned. We mustn’t explain that there is only one path to follow. We cannot let our memories of who our employees used to be cloud who they have, or may become.
Pay can’t be like the silver dollar from Grandma. Everyone loves Grandma, but they probably don't want her to define their pay. Your compensation programs need to show your stars that you recognize and value their growth. Pay your very best like a forward-thinking company, not like a Grandma with soft-focus memories of the person they once were.
Dan Walter is a CECP, CEP, and Fellow of Global Equity (FGE). He is a “Compensation Futurist” who works as Managing Consultant for FutureSense. Dan is also a leading expert on incentive plans and equity compensation issues. He has written several industry resources including the only resource dedicated to Performance-Based Equity Compensation. He has co-authored ”Everything You Do In Compensation is Communication”, , “Equity Alternatives” and other books. Connect with Dan on LinkedIn. Or, follow him on Twitter at @DanFutureSense.